Hersha Hospitality Trust, Philadelphia, announced on Thursday that it is selling 18 properties for US$155 million to an affiliate of Starwood Capital Group.
Hersha indicated that the main reason for the sale was to reduce the REIT’s total mortgage debt by unloading these properties which were performing worse than the rest of the portfolio of 79 properties, totaling 10,702 rooms. Hersha expects to generate net proceeds of approximately US$54 million, reduce its consolidated mortgage debt by approximately US$61.5 million and reduce its proportionate share of unconsolidated mortgage debt by approximately US$18.3 million.
“The sale of these 18 properties represents a major step in the transformation of our portfolio as we continue to execute on our non-core disposition program,” said Jay Shah, Hersha CEO. “The ongoing realignment of our portfolio toward urban gateway markets with higher growth opportunities is anticipated to result in higher RevPAR, improved Hotel EBITDA margins, lower debt and a higher net asset value for the entire portfolio.”
During the second quarter of 2011, average daily rate for 14 of the hotels sold was US$107, which is 32% less than the ADR for the remainder of Hersha’s portfolio. The company expects the sale to improve the portfolio’s overall RevPAR.
“We are incrementally positive on the transaction. The assets being sold are lower quality and in non-core, lower-growth markets,” said asset management firm Robert W. Baird & Co. in an analysis of the sale. “The timing of the sale in the face of challenging market conditions is a win and provides Hersha the flexibility to be an active acquirer in its target markets where pricing has moderated a bit.”
The properties are all in U.S. Eastern Seaboard states and include:
- Hilton Garden Inn in Glastonbury, Connecticut
- Holiday Inn in Norwich, Connecticut
- Residence Inn in Danbury, Connecticut
- Residence Inn in Mystic, Connecticut
- Residence Inn in Southington, Connecticut
- SpringHill Suites in Waterford, Connecticut
- Residence Inn in Williamsburg, Virginia
- SpringHill Suites in Williamsburg, Virginia
- Residence Inn in North Dartmouth, Massachusetts
- Summerfield Suites in Charlotte, North Carolina
- Hampton Inn in Carlisle, Pennsylvania
- Hampton Inn in Danville, Pennsylvania
- Hampton Inn in Selinsgrove, Pennsylvania
- Holiday Inn Express in Malvern, Pennsylvania
- Courtyard by Marriott in Scranton, Pennsylvania
- Hilton Garden Inn in Edison, New Jersey
- Fairfield Inn in Bethlehem, Pennsylvania
- Fairfield Inn in Laurel, Maryland